EU Races to Counter Trump’s Tariffs in Washington Trade Talks

The provided text appears to be an excerpt from an El País article discussing former US President Donald Trump‘s trade policies and his use of tariffs. Here’s a breakdown of the key points:

Context:

The article refers to an “anticorruption mechanism” being considered by Brussels (the EU) as a faster alternative to the WTO for responding to Trump.
It highlights Trump’s “Day of Liberation” on April 2nd, when he imposed tariffs on dozens of US business partners.
Trump’s justification for these tariffs was to correct what he perceived as decades of unfair trade practices.

Trump’s Actions and Justifications:

90-day Truce: After the initial tariff impositions, Trump granted a 90-day truce (ending July 9th, than extended to august 1st) to allow countries to reach agreements.
Threatening Letters: To “scare away comments” that he deemed negative, Trump sent threatening letters, which he published on his social network, Truth.
EU: The EU was treated with “respect” compared to others, implying they might have faced fewer or less severe tariffs in this round.
Mexico and Canada: These countries faced increased tariffs (30% for Mexico, 35% for Canada) with the stated justification being the “traffic of fentanyl.”
Brazil: Brazil, which previously had a “universal” tax of 10% and was one of the few countries with a commercial scale with Washington, was hit with a 50% tariff for “extracconomic reasons.” The article suggests this was to influence the course of a legal proceeding against former Brazilian President Jair Bolsonaro, whom Trump considered a “personal friend” and the target of a “witch hunt.”

Outcomes of Trump’s “90 Agreements in 90 Days” Promise:

The promised “90 agreements in 90 days” did not materialize.
China: A non-aggression pact was reached.
United Kingdom, vietnam, and Indonesia: “Principles of trade agreements” were established.
Indonesia: An agreement was reached the Monday before the article’s publication, involving a 19% tariff (down from a threatened 32%) in exchange for “total opening” of trade.
* Vietnam: Trump announced that Hanoi agreed to remove all tariffs on US exports and pay a 20% universal tax and a 40% tax on products transiting through Vietnam (implying those coming from China). The article notes this agreement lacked specific details and documents.

Overall Tone:

The article presents Trump’s trade policies as volatile, politically driven, and often lacking in transparency (as seen with the Vietnam agreement). It highlights the use of tariffs as a coercive tool and suggests that the stated justifications for some tariffs may not be the sole or primary reasons.

What potential economic consequences could arise from a full-blown trade war between the EU and the US?

The Looming threat of US Tariffs

The European Union is scrambling to formulate a unified response to the escalating threat of new tariffs proposed by former President Donald Trump, should he win the November election. Recent pronouncements from Trump’s campaign suggest a return to aggressive “America First” trade policies, possibly targeting key EU exports like automobiles, agricultural products, and industrial goods. This renewed tariff talk has sent ripples through European markets and prompted urgent discussions in Brussels and national capitals. The core issue revolves around perceived trade imbalances and Trump’s long-held belief that the US has been unfairly disadvantaged in trade deals.

EU’s Immediate Response & Negotiation Strategy

The EU’s initial strategy centers on a multi-pronged approach:

Diplomatic Pressure: High-level delegations are being prepared for Washington,aiming to engage with both the Trump campaign and key figures within the Biden governance (to maintain options irrespective of the election outcome). The focus will be on highlighting the mutually beneficial nature of the current transatlantic trade relationship.

WTO Challenge: The EU is actively preparing legal challenges through the World trade Organization (WTO) should Trump implement tariffs deemed inconsistent with international trade rules. While the WTO’s dispute resolution mechanism is currently hampered, the EU views a formal challenge as crucial for establishing a legal precedent and demonstrating resolve.

Internal Unity: A notable challenge lies in forging consensus among the 27 EU member states. Countries with strong export ties to the US, like Germany and Ireland, are particularly vulnerable and advocate for a firm response.Others, with less exposure, may favor a more cautious approach.

Counter-Tariff Preparation: Brussels is quietly drafting a list of potential counter-tariffs targeting US goods should Trump proceed with his threats. These are intended as a deterrent and a negotiating tool, but their implementation carries the risk of escalating into a full-blown trade war. Key sectors for potential EU retaliation include agricultural products (soybeans, corn), technology (software, semiconductors), and consumer goods.

Sectors Most at Risk: A Deep Dive

Several key sectors are bracing for potential disruption:

Automotive Industry: Trump has repeatedly threatened a 25% tariff on imported cars, a move that would severely impact German automakers like Volkswagen, BMW, and Mercedes-Benz, who have significant production facilities in the US. This could lead to job losses on both sides of the Atlantic.

Agriculture: European agricultural exports, including wine, cheese, and pork, could face retaliatory tariffs. This would hurt farmers and food producers already grappling with rising costs and climate change.

Steel & Aluminum: Following the initial round of Trump tariffs in 2018, the steel and aluminum industries remain vulnerable. Any reinstatement of these tariffs would disrupt supply chains and increase costs for manufacturers.

Luxury Goods: France’s luxury goods sector, including brands like LVMH and Hermès, could be targeted as a symbolic gesture, impacting a significant portion of the French economy.

The Role of the WTO and International Trade Law

The legality of Trump’s proposed tariffs under WTO rules is highly questionable. The WTO’s Most Favored Nation (MFN) principle requires member states to treat all trading partners equally. Imposing tariffs selectively, based on political considerations, could be deemed a violation of this principle. Though, the WTO’s dispute settlement system is currently paralyzed due to the US blocking appointments to its appellate body. This weakens the WTO’s ability to enforce its rulings.The EU is pushing for reforms to the WTO to restore its effectiveness, but progress has been slow.

ancient Precedent: The 2018 Trade Disputes

The 2018-2020 trade disputes under the Trump administration offer valuable lessons. The imposition of tariffs on steel and aluminum led to retaliatory measures from the EU, China, and other countries, disrupting global trade flows and increasing uncertainty. While a limited trade deal was eventually reached with China, the underlying tensions remained. This experience underscores the potential for escalation and the economic costs of a trade war. The impact on US farmers was particularly severe, requiring billions of dollars in government aid to offset lost export revenue.

Potential Benefits of a Negotiated Settlement

Despite the risks,a negotiated settlement offers potential benefits for both sides:

Reduced Trade Barriers: Discussions could focus on reducing non-tariff barriers to trade,such as regulatory hurdles and standards.

Digital Trade Agreements: A new agreement could address emerging issues in digital trade, including data flows and e-commerce.

Cooperation on Global Challenges: Enhanced trade cooperation could facilitate collaboration on shared challenges like climate change and supply chain resilience.

Investment Promotion: A deal could include provisions to promote investment in both the US and the EU.

Practical Tips for Businesses

Businesses with transatlantic trade exposure should take the following steps:

1. Diversify Supply Chains: reduce reliance on single suppliers and explore alternative sourcing options.
2. Scenario Planning: Develop contingency plans for different tariff scenarios.
3. Monitor Developments: Stay informed about the latest trade negotiations and policy changes.
4. Engage with Industry associations: Participate in industry efforts to advocate for favorable trade policies.
5. Review Contracts: Examine contracts for clauses related to tariffs and force majeure.

Real-World Example: The Impact on Irish Whiskey

In 2018, the imposition of US tariffs on European goods in response to steel and aluminum tariffs significantly impacted the Irish whiskey industry.Exports to the US, a key market